Correlation Between Chipotle Mexican and Burgerfi International

Can any of the company-specific risk be diversified away by investing in both Chipotle Mexican and Burgerfi International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Chipotle Mexican and Burgerfi International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chipotle Mexican Grill and Burgerfi International, you can compare the effects of market volatilities on Chipotle Mexican and Burgerfi International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Chipotle Mexican with a short position of Burgerfi International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipotle Mexican and Burgerfi International.

Diversification Opportunities for Chipotle Mexican and Burgerfi International

-0.69

Correlation Coefficient

Chipotle Mexican  Burgerfi International

Excellent diversification

The 3 months correlation between Chipotle and Burgerfi is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Chipotle Mexican Grill and Burgerfi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burgerfi International and Chipotle Mexican is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Chipotle Mexican Grill are associated (or correlated) with Burgerfi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burgerfi International has no effect on the direction of Chipotle Mexican i.e., Chipotle Mexican and Burgerfi International go up and down completely randomly.

Pair Corralation between Chipotle Mexican and Burgerfi International

Considering the 90-day investment horizon Chipotle Mexican Grill is expected to generate 0.29 times more return on investment than Burgerfi International. However, Chipotle Mexican Grill is 3.44 times less risky than Burgerfi International. It trades about 0.13 of its potential returns per unit of risk. Burgerfi International is currently generating about -0.04 per unit of risk. If you would invest  178,000  in Chipotle Mexican Grill on January 20, 2024 and sell it today you would earn a total of  112,797  from holding Chipotle Mexican Grill or generate 63.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Chipotle Mexican Grill  vs.  Burgerfi International

Chipotle Mexican Grill

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chipotle Mexican Grill are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Chipotle Mexican reported solid returns over the last few months and may actually be approaching a breakup point.

Burgerfi International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Burgerfi International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Chipotle Mexican and Burgerfi International

The main advantage of trading using opposite Chipotle Mexican and Burgerfi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipotle Mexican position performs unexpectedly, Burgerfi International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Burgerfi International will offset losses from the drop in Burgerfi International's long position.

The idea behind Chipotle Mexican Grill and Burgerfi International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.